Industrial Deregulation, Skill Upgrading, and Wage Inequality in India
We investigate the relationship between economic deregulation (delicensing), skill upgrading, and wage inequality during the 1980s and 1990s in India. We use a unique dataset on India's industrial licensing regime to test whether industrial deregulation during the 1980s and 1990s played a role in generating demand for skilled workers, as measured by the employment and wagebill shares of white-collar workers, and in raising the returns to skilled labor, as measured by the skill premium. Our analysis focuses not only on the difference between licensed and delicensed industries but also on the comparison of these differences during the 1980s, when India's external sector remained relatively closed to the world economy, and the 1990s, when India underwent massive liberalization reforms and became increasingly integrated with the global economy. We identify two main channels through which industrial delicensing affects the demand for skills and wage inequality: capital- and output-skill complementarities. Our analysis finds two important results. First, capital- and output-skill complementarities existed for firms in both licensed and delicensed industries but were stronger in delicensed industries both before and after 1991. The exception is output-skill complementarities with respect to the skill premium, where delicensed industries experienced lower output-skill complementarities compared to licensed ones both before and after 1991. Second, the contribution of industrial delicensing to both types of complementarities was considerably higher during the 1980s and much smaller after 1991. These results suggest that industrial delicensing benefited skilled labor via capital- and output-skill complementarities during the 1980s, the decade before India liberalized it's trade and investment regime. Thus, much of the increase in the demand for and returns to skill as a result of capital- and output-skill complementarities can be attributed to domestic reforms during the pre-1991 period in India.
|Date of creation:||Jan 2008|
|Contact details of provider:|| Postal: 812-855-1021|
Web page: http://www.iub.edu/~caepr
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eric A. Verhoogen, 2008.
"Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 123(2), pages 489-530.
- Verhoogen, Eric A, 2007. "Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector," CEPR Discussion Papers 6385, C.E.P.R. Discussion Papers.
- Verhoogen, Eric, 2007. "Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector," IZA Discussion Papers 2913, Institute for the Study of Labor (IZA).
- Attanasio, Orazio & Goldberg, Pinelopi K. & Pavcnik, Nina, 2004.
"Trade reforms and wage inequality in Colombia,"
Journal of Development Economics,
Elsevier, vol. 74(2), pages 331-366, August.
- Attanasio, Orazio & Goldberg, Pinelopi & Pavcnik, Nina, 2003. "Trade Reforms and Wage Inequality in Colombia," CEPR Discussion Papers 4023, C.E.P.R. Discussion Papers.
- Orazio Attanasio & Pinelopi Goldberg & Nina Pavcnik, 2003. "Trade Reforms and Wage Inequiality in Colombia," NBER Working Papers 9830, National Bureau of Economic Research, Inc.
- Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Investment, Outsourcing and Relative Wages," NBER Working Papers 5121, National Bureau of Economic Research, Inc.
- Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Papers 95-14, California Davis - Institute of Governmental Affairs.
- Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Department of Economics 95-14, California Davis - Department of Economics.
- Utsav Kumar & Prachi Mishra, 2008. "Trade Liberalization and Wage Inequality: Evidence from India," Review of Development Economics, Wiley Blackwell, vol. 12(2), pages 291-311, May.
- Prachi Mishra & Utsav Kumar, 2005. "Trade Liberalization and Wage Inequality; Evidence From India," IMF Working Papers 05/20, International Monetary Fund.
- Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
- Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras," NBER Working Papers 5122, National Bureau of Economic Research, Inc.
- Puja Vasudeva Dutta, 2005. "Accounting for Wage Inequality in India," PRUS Working Papers 29, Poverty Research Unit at Sussex, University of Sussex.
- Harrison, Ann & Hanson, Gordon, 1999. "Who gains from trade reform? Some remaining puzzles," Journal of Development Economics, Elsevier, vol. 59(1), pages 125-154, June.
- Ann Harrison & Gordon Hanson, 1999. "Who Gains from Trade Reform? Some Remaining Puzzles," NBER Working Papers 6915, National Bureau of Economic Research, Inc.
- Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 367-397.
- Wood Júnior, Thomaz, 1995. "Workers," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 35(2), March.
- Gordon H. Hanson, 2003. "What Has Happened to Wages in Mexico since NAFTA?," NBER Working Papers 9563, National Bureau of Economic Research, Inc.
- Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 199-230.
- Daron Acemoglu, 1999. "Patterns of Skill Premia," NBER Working Papers 7018, National Bureau of Economic Research, Inc.
- Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc.
- Pavcnik, Nina, 2003. "What explains skill upgrading in less developed countries?," Journal of Development Economics, Elsevier, vol. 71(2), pages 311-328, August.
- Nina Pavcnik, 2000. "What Explains Skill Upgrading in Less Developed Countries?," NBER Working Papers 7846, National Bureau of Economic Research, Inc.
- Adrian Wood, 1995. "How Trade Hurt Unskilled Workers," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 57-80, Summer.
- Cragg, Michael Ian & Epelbaum, Mario, 1996. "Why has wage dispersion grown in Mexico? Is it the incidence of reforms or the growing demand for skills?," Journal of Development Economics, Elsevier, vol. 51(1), pages 99-116, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:inu:caeprp:2008-002. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Center for Applied Economics and Policy Research)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.